According to Money, Wal*Mart wants to open an Industrial Bank to lower the cost/stabilize their internal credit. They claim that they have no interest in opening branches, and have pre-existing commitments to pre-existing in-store branches (big surprise on that claim there.) Their potential competitors of course think that an industrial bank is just the beginning and they will try to monopolize the entire banking industry.
Your thoughts?
My thought is the opposite of Big Banking spin: yes, it may actually hurt banking on the large-scale level due to Wal*Mart’s distorting efficiencies of scale.
However, more power to them if they DO try to open banking branches. Nearly every bank as it is has rates and fees that are ludicrous, even most credit unions. While I don’t think Wal*Mart would offer yields as high as Vanguards Money Market, nor even the respectable yields of Netbank, I fail to see how a little more competition would hurt rates and fees for consumers. If Big Banking folds, boo fucking hoo.
I strongly support Wal Mart’s efforts to open a bank. I’ve been a credit union member for quite a while. Still, the more competition the better. I had to accept the consolidation in the banking industry during the 1990s. I can only hope the banks are ready to face some competition again.
I doubt they’ll do better than my credit union, which I love.
But they can hardly do worse than many of the impersonal big banks out there, who really do act as if they don’t want the everyday business of working-class folks.
My experience with credit unions has been great and I am a big fan. That said, the banking industry could use a little more competition. While Walmart is a massive company its profits are, relatively, very small so they do need to diversify.
I heard this discussed on the radio a month ago. If I understand it correctly, stores like Target have established their own bank to save on credit card charges. Wal-Mart wants to do the same.
I don’t think that Wal Mart has the economy of scale to hurt institutions like Chase, Bank of America, Citibank, HSBC, Wells Fargo etc… Those guys are pretty much everywhere already. It’s not the same as moving a big box discount store into a small town.
As if none of those banks don’t try to monopolize the entire industry… No, they’re not afraid WalMart will try-- they’re afraid WalMart will succeed. Apparently competition is great as long as you’re not the target of that competition. Color me unsympathetic.
I say let 'em try. Of course banking is an entirely different industry than retail, so maybe WalMart really isn’t trying to get into retail banking. Or, maybe they’ll bring some fresh thinking into the industry. At any rate, let the customers decide what they want.
It appears that all Wal*Mart are trying to do is insource their payment infrastructure, probably because setting up the infrastructure to do so is cheaper than the fees they are currently paying. I can’t imagine why anyone would be against this.
If they aren’t being entirely truthful about that, and they do want to open a commercial bank, I cannot see what is wrong with that either. I don’t really see what advantage they have apart from existing store space. It is a fundementally different market so it’s not like they have very much relevent experience.
Some stores go through their own system and others through external systems. For example, my Men’s Wearhouse credit card is issued by and credit is extended from Monogram Credit Card Bank of Georgia. My Chevron credit card, on the other hand, goes through Chevron’s subsidary Chevron Credit Bank, N.A. Wal-Mart could have a lot to gain by moving to an in-house credit system with their own consumer credit cards for use at Wal-Mart and Sam’s Club instead of deals with companies like Discover. Remember, they were one of the leaders in the class-action suit against the credit conglomerates and the way payments on debit cards are processed. Note that now in a lot of places, you have to opt out of the debit processing and force the system to run it as a credit transaction.
Personally I don’t see why anyone would care. Giant monolithic lowest-common-denominator banking? Step forward Citibank, BankofAmerica, JMPChase or whoever, who are plenty big enough to look after themselves.
Small, local, high-service community banks? Given that they already have to deal with all the banking mammoths mentioned above, I seriously doubt that WalBank would make that much of a difference to their prospects.
And that is assuming that they are actually interested in retail - I also think its all about the card processing, where again there are already plenty of grown-up companies with sharp elbows (and practices) who can look after themselves.
However you feel about Wallyworld Vs Mom’n’Pop retail, banking is a whole different ballgame…
You should!
When Sprawl-Mart is the ONLY kid on the block . . . . . and if Sprawl=mart doesn’t have it no one will because there will be no one else to sell it IF they were there to have it.
